What is the impact of the US tariff crisis on the global automotive industry?

Recently, the Trump administration in the United States has frequently threatened to impose tariffs, especially on the automotive industry, in order to boost the country's automotive industry and save the already precarious business and economic situation in the United States.

The US tariff plan on Canada and Mexico poses a challenge to the close automotive industry interdependence among the three countries. Mexico, as an important automobile export base, has many car companies such as Volkswagen, BMW, Toyota, etc. set up factories here. About 90% of the cars produced in Mexico in 2024 will be exported, and nearly 80% will be sold to the United States. The imposition of tariffs has increased costs for car companies in Mexico, which may reduce investment and production in Mexico and Canada, and shift to other regions. The cost of purchasing a car for American consumers will also significantly increase. The Mexican Automotive Parts Industry Association warns that tariffs imposed by the United States on Mexican and Canadian products will increase the average selling price of American cars by about $3000, and car sales may decrease by one million units by 2025.

Trump's plan to impose tariffs on EU products has made the European automotive industry highly vigilant. Hildegard Muller, President of the German Association of Automobile Manufacturers, warned that the tariff plan would make American consumers pay higher car prices and impact global car manufacturers. Volkswagen Group is also concerned that tariffs may have harmful economic impacts on American consumers and the international automotive industry. After Trump announced tariffs on Mexico, Canada, and China, Volkswagen Stellantis、 The stock prices of European vehicle and component manufacturers such as Volvo have rapidly declined. Evercore ISI consulting firm stated that suppliers such as Autoliv and Anbofu are greatly affected by US tariffs, and their profits may decrease by 8% to 15%.

Japanese, South Korean and other car companies located in Asia have also been affected. About 60% of Mazda's cars produced in Mexico are exported to the United States, and an increase in tariffs would significantly increase its export costs. Honda also stated that if the United States imposes permanent tariffs on imported cars from Mexico, it will have to consider shifting production. For Chinese automobile companies, although China has a complete industrial chain and a huge domestic market, the US tariff policy still has a certain impact. On the one hand, China's imposition of tariffs on high displacement cars and pickups originating from the United States has to some extent affected the market for American imported cars in China, accelerating the marginalization trend of American cars in China. On the other hand, some high-end German car models produced in the United States have also been subject to tariffs, which has brought certain opportunities for the development of Chinese luxury car brands.

This move by the United States has also disrupted the global automotive supply chain layout.

The automotive industry has a high degree of globalization, with clear division of labor in the global automotive industry chain and global supply of components. The imposition of tariffs by the United States has forced multinational car companies to reassess their supply chain layout and consider relocating or transferring production processes to other countries and regions. However, transferring production capacity is not an easy task and faces many problems and challenges, such as the need for time and capital costs, as well as potential new policy risks. At the same time, the adjustment of the supply chain will also affect component suppliers, and some suppliers may lose their original orders, leading to overcapacity and even facing survival crises. Autoliv had warned that some car suppliers may suffer financial setbacks and may not be able to survive.

Under the tariff storm, car companies are facing pressure from rising costs and declining profits, and may reduce their investment in technology research and development. The automotive industry is currently in a critical stage of development towards electrification, intelligence, and networking, and technological innovation requires significant funding and resource support. In addition, the increase of trade barriers will also hinder the cross-border flow of technology and talent, which is not conducive to the global automotive industry's technological exchange and cooperation, and slow down the pace of technological innovation in the automotive industry.

In short, the US tariff crisis has had multiple negative impacts on the global automotive industry, bringing enormous uncertainty and challenges to the industry. In today's globalized world, the automotive industries of various countries are interdependent. It is hoped that countries can resolve trade disputes through dialogue and negotiation, and jointly maintain the stability and development of the global automotive industry.